How to improve your financial wellbeing
The pandemic has shone a spotlight on the importance of financial wellbeing. So we are able to respond to unexpected events as they happen.
What is financial wellbeing?
Life will always throw us curveballs. That's why it’s equally important for us to focus on our financial wellbeing as it is on other aspects of our wellbeing.
So what is financial wellbeing? Think of it in relation to our physical wellbeing. With our physical wellbeing, we focus on things like what we eat, how much we exercise, getting enough sleep and being part of a community.
We can approach our financial wellbeing in a similar way.
Start by setting some realistic goals. You might want to save $50,000 for a deposit for your first investment property. You might want to pay off your $10,000 credit card. Or it might be something as simple as paying off your car loan. The right goals will depend on your circumstances.
Once you’ve set your goals and targets, it’s time to put different strategies in place to help put strong financial foundations around your family.
Set up an emergency fund
An emergency fund is there to provide financial support in the event you lose your job, even temporarily.
ASIC’s MoneySmart1 suggests putting aside the equivalent of three months of expenses in an emergency fund, or aim to save up that amount over time.
An emergency fund gives you peace of mind. When the unexpected happens, you have the resources to survive and the ability to set a different course.
Put in place the right insurances
Insurance is another important building block of your financial wellbeing. Policies such as life insurance and income protection may pay out should the policy holder suffer an accident or illness and can no longer work.
This is an essential layer of cover in any financial wellbeing strategy, albeit one we all hope never to have to access.
Build up a savings muscle
Getting into the habit of making regular savings is another way we can increase our financial wellbeing. There are many ways to approach this. You may want to make regular contributions to a high interest savings account. You may want to add to your super on a regular basis. The right approach will depend on what you are trying to achieve.
Be conservative when it comes to debt
Some debts are productive and help us to build our wealth. Taking out a mortgage may be one example. Other debts such as credit cards may not be so productive.
Whatever your approach to debt, the idea is to ensure you can always meet your obligations. It might be an idea to stress test your personal finances and make sure in the event your circumstances change, you can still pay off your debts.
If you are struggling to make your repayments, you can find out more here. There are many options to help support your family and your financial situation.
Track your incomings and outgoings
Information is power. It’s important to know how much money comes into the family and how much you need for regular expenses. This includes payments like your rent or mortgage, bills, transport plus more. Internet banking makes it easy to track what comes in and what goes out. What’s important is to monitor this on a regular basis. This will help you set up a family budget.
You can set up your budget by tracking all your regular expenses and money coming in. You can update your budget depending on any changes to incomings and outgoings.
These are just the basics when it comes to your financial wellbeing.
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Things you should know
1 ASIC, MoneySmart, ‘Save for an emergency fund’, accessed 2/8/21, https://moneysmart.gov.au/saving/save-for-an-emergency-fund
Any advice provided in this article is of a general nature only and does not take into account your personal needs, objectives and financial circumstances. You should consider whether it is appropriate for your situation. Please read the applicable statement(s) on our website before acquiring any product.